Pet-supplies retailer Chewy (CHWY) saw its stock price jump between 11% and 13% following the release of its fourth-quarter 2025 earnings report, which featured a significant earnings beat and forward guidance that exceeded Wall Street expectations.
The company reported adjusted earnings per share (EPS) of $0.27 for Q4, crushing the analyst consensus estimate of $0.09 by $0.18. Revenue for the quarter came in at $3.26 billion. While reported year-over-year growth was 0.5%, this was due to a calendar discrepancy; on a normalized 13-week basis, revenue grew 8.1%.
Key financial metrics showed robust health. Gross margin expanded by 90 basis points to 29.4%, and adjusted EBITDA margin improved 120 basis points to 5.0%, with adjusted EBITDA for the quarter reaching $162.3 million. For the full fiscal year 2025, Chewy reported net sales of $12.60 billion, adjusted EBITDA of $719.2 million (a 26% year-over-year increase), and record free cash flow of $562 million.
The major catalyst for the stock surge was the company's 2026 full-year revenue guidance of $13.6 billion to $13.75 billion, which surpassed the analyst consensus of $13.58 billion. For Q1 2026, Chewy guided for revenue of $3.33 billion to $3.36 billion and adjusted EPS of $0.40 to $0.45, largely in line with expectations.
Operational highlights included a 4% year-over-year increase in active customers to 21.3 million, while net sales per active customer rose 2.2% to $591. CEO Sumit Singh attributed the strong performance to the "durability of the Chewy model" and trends of pet owners trading up to premium products.
A significant forward-looking element is Chewy's investment in artificial intelligence. The company expects AI-driven operational efficiencies to deliver a "low tens of millions" benefit in 2026, scaling up to roughly $50 million or more in annualized savings by 2027. Growth initiatives also include the expansion of Chewy Vet Care, which now has 18 locations and is described as the fastest-growing segment per active customer, and the recent acquisition of equine health platform SmartEquine.
